March 6, 2019 Read More →

Reforming Energy Markets

The Economist:

Shale (or fracking) explains much of the boom in the oil market, as well as the volatile market performance of energy companies. Production increases are occurring at the same time that profitability is declining. In 1980, 29% of the Standard & Poor’s 500 index was occupied by oil and gas; today it is 5%. Fracking has flooded the market with cheap gas, pushing prices down further. Investors seduced by the promise of increased profits are being left at the altar of derivatives standing in for real economic growth.

You claim that energy companies that rely on fossil fuels are merely “responding to incentives set by society”. But oil and gas companies with their deep pockets continue to enjoy the privileges of a bygone era with the false promises of jobs and business expansion that have yet to materialise.

The fact is that last year, oil and gas stocks placed last on the S&P 500. Money managers who continue to invest looking nostalgically backwards ignore this at their own (and their beneficiaries’) peril.

Tom Sanzillo
Director of finance
Institute for Energy Economics and Financial Analysis
Cleveland

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Posted in: IEEFA In the News

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